Indonesian shares plunge 11.6% after MSCI proposes removing market from emerging-market indexes

Indonesia’s main stock index fell 11.57% on Friday 16 October to close at 5,185.10, CNBC Indonesia reported. The fall came after index provider MSCI proposed moving the country’s market out of its emerging-market category.

Reuters said it was the Jakarta index’s steepest one-day drop since 1998 and took it to a six-year low. Trading was halted for 30 minutes after the open. The rupiah weakened 0.6% to 18,070 per US dollar.

MSCI said it was starting a consultation on reclassifying Indonesia as a “Standalone Market”. Standalone markets are not included in MSCI’s emerging or frontier market indexes, Reuters reported. Funds that track those indexes or are measured against them would have to sell.

In its statement, MSCI said Indonesian authorities had announced reforms, including more disclosure of shareholders and a plan for a minimum free float of 15%. It said investors had not seen enough progress, and that concerns remained about “suspected coordinated trading behavior and lack of evidence of meaningful enforcement”.

MSCI said it expects to go ahead with the change unless the consultation finds clear evidence of material improvement. It will take feedback until 30 April 2027 and decide on or before 30 June 2027.

Indonesia’s senior economic minister, Airlangga Hartarto, said there was “a big question mark” over why MSCI did not raise the standalone option during a meeting in Bangkok this week, Reuters reported. Jeffrey Hendrik, chief executive of the Indonesia Stock Exchange, said he would ask MSCI to clarify the basis for its decision.

UBS estimated the move could lead to about $US4 billion in outflows from passive funds, Reuters reported.